Wednesday 10 March will see the coming into force of the EU’s Sustainable Finance Disclosure Regulation (SFDR). Technical standards to specify “the content, methodologies and presentation of disclosures” have recently been presented in draft – find them here – and suggested for application from 1 January 2022.
The 195-page final report with draft regulatory technical standards (RTS) for the reporting under SFDR was published on 2 February – jointly by the EU’s three supervisory bodies ESMA, EBA and EIOPA (respectively monitoring securitities/markets, banking and insurance/pensions).
Targets the greenwashing
“The proposed RTS aim to strengthen protection for end-investors by improving Environmental, Social and Governance (ESG) disclosures to end-investors on the principal adverse impacts of investment decisions and on the sustainability features of a wide range of financial products. This will help to respond to investor demands for sustainable products and reduce the risk of greenwashing,” the EU authorities write in a press release.
Principal adverse impacts, that investments could have on sustainability factors, should be disclosed on each entity’s website. A statement should spell out how it relates to climate and environment, as well as to social and employee matters, respect for human rights, anti-corruption and anti-bribery aspects.
Further, on the product level, sustainability characteristics of financial products “are to be disclosed in an annex to the respective sectoral pre-contractual and periodic documentation in mandatory templates and on providers’ websites”.
While “financial market participants and financial advisers are required to apply most of the provisions on sustainability-related disclosures laid down in the SFDR from 10 March 2021,” the RTS are proposed to apply from the start of 2022.
For an efficient overview of the SFDR, here is an introduction by Dutch consultancy Sustainalize, also available as a 4-page pdf.